Hello, welcome to the latest Astute Market Overview, election special!
As you will know, this Thursday we will all be heading to our local polling stations, ID in hand, to vote in the 2024 general election. This leads us to question, what will the election result mean for investments?
According to recent polls, a Labour victory seems likely, perhaps even a supermajority for Starmer’s party. For those in their twenties, there has never been a general election result they have voted in that has yielded anything other than a conservative win. After 14 years of Conservatives in power, a Labour government would certainly mark a significant shift.
However, from a market perspective, the impact is likely to be muted. The manifestos of the major political parties lack radical policies; most proposals have been moderate, boring, even. But boring is good news for markets – it suggests stability and predictability.
Whilst changes may come down the line, politicians are unlikely to take any huge risks in the early days. Overall, UK politicians are very focused on fiscal discipline, especially in the wake of unfunded tax cut announcements under Liz Truss in the 2022 mini budget, less than 2 years ago. The main parties are committed to fully funded and budgeted announcements, which reassures markets.
This commitment to fiscal discipline suggests that this election could be supportive for investment markets, reinforcing the UK’s reputation as a stable and responsible nation. The main concern for markets would be a hung parliament, which would introduce uncertainty due to a lack of decisive government action. However, this outcome is unlikely.
So, given that we expect little market impact from this election, how else could it impact your finances?
The most significant impact could come from policy changes regarding taxation. Whilst the two main parties have committed to not raising income tax, national insurance or the main rate of VAT, there has been little mention of some key areas such as inheritance tax. There is potential for tweaks around the edges of policy in future, especially with the limited fiscal headroom to play with, and public services in need of funding.
Any changes are likely to be made in the first budget of a new government. As always, we will be watching any developments closely.
In France, the first round of snap elections took place on Sunday, with an impressive turnout.
The National Rally, headed by Marine Le-Pen and Jordan Bardella, came out on top with 33% of the vote, signalling a clear shift to the right for the country.
Ahead of next Sunday’s second round, all eyes are on the remaining centre and left parties. Will they join to form an alliance against the National Rally? Cooperation amongst these parties would be key to preventing an outright majority for the far right, but the picture remains very uncertain.
If a party other than President Macron’s wins a majority, he will appoint a prime minister from that party, and France will be under cohabitation. The new prime minister would have significant influence over policy implementation, but without an outright majority for any party, major policy reform is likely to be gridlocked.
Following the result on the weekend, the French stock market was in positive territory, likely due to the fact that the National Rally party did not gain an absolute majority in the first round.
And finally, turning to the election which is likely to have the most influence, the televised debate between Donald Trump and Joe Biden took place last week. The debate left many questions unanswered and raised the quandary for the Democrats – will they look to replace Biden? President Joe Biden stumbled over his words a few times, fuelling the attack that he is unfit to be president for another term.
We look forward to digesting the results of this week’s UK general election in our quarterly commentary, which will be published in due course.
We’ll see you next time.
